Doug Kass shares his views every day on RealMoneyPro. Click here for a real-time look at his insights and musings.


More Comfy With Shorting Financials

Originally published at 3:23 PM EDT on May 13, 2016

iShares 20+ Year Treasury Bond ETF ( TLT - Get Report) is up a beaner.

The 10- and 30-years are trading with a five-basis-point-lower yield today at 1.71% and 2.56%, respectfully.

More importantly, the yield curve is continuing to flatten, which is a red signpost for financials that have an imbalance of rate-sensitive assets over liabilities.

The recovery in bank stocks, heralded by many, seems premature to me as capital markets activity deteriorate and net interest margins become more problematic.

I am growing more comfortable with my Financial Select Sector SPDR Fund (XLF - Get Report) short, and I am trying to add to the position.

Position: Short XLF

Will It Be Monsanto Merger Monday?

Originally published at 3:18 PM EDT on May 13, 2016

I am taking a very small spec on Monsanto ( MON) , which appears to be a target of two German companies.

My analysis says a deal makes sense for both companies.

If there is no news on Monday, win/lose/draw, I will take off this long rental.

I have added substantially to Potash (POT) over the past two trading days.

Position: Long MON small, POT

Takeaways and Observations

Originally published at 8:51 AM EDT on May 13, 2016

I was out of the office Thursday, but my take on the session is: "Up, Down, Up, Flat."

It was a mixed day in terms of economic data, with potholes everywhere. (You'd have to be blind not to see them.) It was all about retail yet again, and it sure wasn't pretty.

I've been all over that sector's problems lately, but much of the business media brought us nothing but yarns from the likes of CEO Terry Lundgren of Macy's (M - Get Report) up until the "Retail Wreck" of the past few days. I'll have more to say about this next week, but suffice to say that you have to wonder how all of the "talking heads" missed the material erosion in retailers' February and March results.

Many have also missed the industry's margin vulnerability, loss of pricing power and loss of market share to Amazon (AMZN - Get Report) . But this pajama trader simply did channel checks on Macy's and other chains recently and saw retail's weakening condition. (I guess we could say the same thing about Apple (AAPL - Get Report) !)

Nordstrom (JWN - Get Report) was down some 15% in premarket trading at last check, which is good news because I'm shorting it. It's my only remaining exposure to retail, but I'll likely cover half of my short position today. After all, the stock has tumbled from $56.20 when I added it to my "Best Short Ideas" list in March to around $37.70 at last check in premarket action.

My other takeaways and observations for Thursday's session:

  • AAPL made another near-term low, trading briefly under $90. It was down 2.35% on the day, but Apple announced a $1 billion investment in Chinese ride-sharing company Didi Chuxing. Is CEO Tim Cook serious?
  • Monsanto (MON) became a possible takeover target of two different German companies. This led me to re-establish a medium-sized position in rival fertilizer company Potash Corp. (POT) . I plan to buy more at current prices today.
  • I did no trading yesterday other than buying some POT. :)
  • I remain manifestly bearish and deep into the ursine territory. My net-short exposure is as high as it's been in two years.
  • The S&P 500 futures were down 3.5 points at last check, indicating more selling pressure in today's regular session.
  • The U.S. dollar strengthened.
  • Oil fell 55 cents to $46.15 a barrel.
  • Gold lost three beaners to $1,268 an ounce.
  • Among agricultural commodities, wheat was -1, corn -1 and soybeans -4.50.
  • Lumber was unchanged.
  • Bonds were lower in price, with the iShares 20+ Year Treasury Bond ETF (TLT - Get Report) losing $0.57. But 10- and 30-year U.S. Treasury yields both added two basis points.
  • Municipal bonds were well bid, but closed-end muni funds were mixed.
  • High-yield debt was slightly higher. The iShares iBoxx U.S. Dollar High Yield Corporate Bond ETF (HYG - Get Report) finished +$0.09 and the SPDR Barclays High Yield Bond ETF (JNK - Get Report) added $0.03.
  • The Blackstone/GSO Strategic Credit closed-end fund (BGB - Get Report) finished the day three pennies higher.
  • Bank stocks were flat to lower, but brokerage stocks got hit -- led by a two-beaner drop in Goldman Sachs (GS - Get Report) . Insurers were slightly higher, with Geico/General Re parent Berkshire Hathaway (BRK.A - Get Report) , (BRK.B - Get Report) recovering from recent weakness.
  • Old tech ended mixed.
  • Energy was stronger again, with Exxon Mobil (XOM - Get Report) up $1.
  • Biotech got hit, with the Nasdaq Biotech Index down 2%. Allergan (AGN - Get Report) and Valeant Pharmaceuticals (VRX) were conspicuous to the downside. Joe Papa's old bag Perrigo (PRGO - Get Report) didn't fare well either, down 4%.
  • Autos were up fractionally, but agricultural equipment was mixed. Caterpillar (CAT - Get Report) was down $0.70 and is approaching a new low.
  • Consumer nondurables were higher, but not considerably so.
  • Media stocks were weak. Walt Disney Co. (DIS - Get Report) saw another drop, but fell less than $1.
  • The TFANGs were same old, same old. AMZN pushed ahead by $4.70, but Tesla (TSLA - Get Report) was -$1.68 and Netflix (NFLX - Get Report) -$2.28. I remain short on both.
  • Among individual stocks of note, Twitter (TWTR - Get Report) hit new lows, but Oaktree Capital (OAK - Get Report) rebounded by 71 cents.
  • There was some good news for our recent shorts of the iShares MSCI United Kingdom ETF (EWU - Get Report) and the iShares China Large-Cap ETF (FXI - Get Report) . Both were down a few pennies apiece. (The FTSE 100 was also lower at last check Friday morning.)
Position: Long HIG, DD, OAK, SH, POT; Short XOM, BRK.B, EWU, FXI, CAT, SPY, QQQ, IWM, JWN, DIS, CMCSA, LNC, MET, NFLX (small), TSLA (small), SBUX (small)
 
 

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Doug Kass is the president of Seabreeze Partners Management Inc. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.